Companies have a lot to gain through global sourcing, such as the ability to get products to market faster, lower costs, increase productivity and create a better focus on core competencies.  All of these benefits can be lost if the wrong global sourcing provider is chosen.  Failing to choose the right vendor can leave the outsourcing company in a worse condition than before. 

By thoroughly analyzing a global IT provider, organizations can avoid repeating the same mistakes that many others have made in the industry.  It is vital that the vendor chosen is able to deliver solutions that will meet the outsourcing company’s needs.  There are key criteria that must be considered when deciding the appropriate global sourcing provider.  Even though a vendor may be a good fit for one company, doesn’t mean the same vendor will align properly with another.

Vendor Size – Deciding to go with a large vendor versus a smaller one is tricky.  Larger vendors tend to have several outsourcing services in order to provide multiple offerings to clients.   The problem with going with a large IT vendor is that there is a lack of individualized attention.  On the other hand, vendors that are too small may not have the services needed.  The solution is finding the right balance - a global sourcing provider that is big enough to handle the IT work, but small enough to give personalized and prompt attention to the outsourcing company.

Industry Expertise – Vendor expertise is crucial to the success of IT projects.  It is ideal to outsource to a global sourcing provider that has knowledge in various software technologies.  If a vendor has limited expertise, there is no way of knowing if there is a better method for software and process development.  Vendors should also have knowledge in the outsourcing company’s market.

Employee Qualifications – The quality of development is only as good as the developer’s knowledge and experience.  When interviewing vendors, it is important to inquire about the background and experience of the employees.  How many years have they been in this line of work?  What type of degrees have they earned?  Finding out the language skills of the employees is also crucial as language barriers can harm an IT project.

Communication Capabilities – Vendors should have some type of communication infrastructure in place.  There should be a system for knowledge transfer and a well defined method for communicating project requirements.  Also, the vendor will need to have either email, phone or other type of communication capability that would allow the outsourcing company to discuss the project with the vendor. Some global sourcing providers have project managers located in the United States to coordinate projects and schedules.

Security Measures – The protection of intellectual property is essential in the IT industry.   If the vendor is located in another country, the laws of that region should be reviewed to find out the level of intellectual property protection.  Employees of global sourcing providers are often culprits of trade secret theft.  Before signing a contract with a vendor, find out what kind of background checks are done on employees.  Vendors should have firewalls and other types of security protection methods established to protect proprietary information.

This list is just a sample of criteria that should be reviewed.  A&E Consulting can help you choose the right global sourcing provider in order to ensure the success of your IT projects.

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What if you were able to boost the productivity of your IT department and get products on the market faster, while cutting your costs dramatically?  Many companies have been able to accomplish these goals by global sourcing a component of their IT services.  This topic has generated a lot of heated debates, but the bottom-line is that businesses are able to benefit substantially by using global sourcing providers.  Today, most of the Fortune 500 companies are outsourcing at least one of the daily business operations to global sourcing partners.

Some of the major benefits of global sourcing are listed below.

Expanded hours of operation. Most businesses put a major emphasis on a project’s budget, which is important.  However, it is just as crucial to focus on the time it takes to get the project done.  When working with a global sourcing provider, you are able to have an IT department that runs 24 hours a day.  As the workday for your U.S. employees comes to an end, the vendor’s employees will just be starting their day.  For IT managers, this schedule is extremely productive.  They can review a project, make suggestions and send it to the global sourcing partner.  When the IT manager returns to work the next day, the revisions have been made and the development process is able to continue.

Access to qualified IT personnel. According to a Duke University study, businesses are looking for offshore employees because there has been a steady decline the number of engineering and science graduates in the United States.  It is estimated that countries such as India and China graduate 12 times more engineers than the United States.  Many of these graduates are fluent in English, which makes them attractive to U.S. employers.

Ability for rapid scaling of operations. A global sourcing provider can be used to grow or downsize an IT department very quickly.  Global sourcing also gives the outsourcing company the ability to easily add or subtract a new type of software.

Better reach in the global market. By mere geography alone, global sourcing helps companies looking to expand globally.  Global sourcing allows businesses to reach international customers and provide improved service and problem solving.  Having different locations gives the outsourcing company more flexibility in making sure that the business continues even in the case of a disaster.

Accelerate technical implementations. When your company is looking to create a new system or business process, it can be done fairly quickly with a global sourcing partner.  Many vendors already have the necessary hardware and software in place, which makes it easier to turn ideas into actual products.

Provide seasonal workforce flexibility. Workload can fluctuate depending on the amount of projects currently being handled by your IT department.  A global sourcing partner can be used on an “as needed basis,” meaning they complete projects during the busiest times for your company.  By using a seasonal workforce provided by a global sourcing partner, your company can avoid the hassle of hiring temporary IT employees.

Cost reduction. The salaries paid to employees in many other countries are considerably lower than the amount that U.S. employees are paid.  In some countries, the average amount that an IT employee earns is less than 30% of a U.S. employee’s salary.

Global sourcing greatly reduces the cost of production and operations, as it decreases the amount paid on overhead.   As costs go down, the financial position of the company strengthens, which in turn frees up more money that can be used for core business services and new development.

Global sourcing is a resource worth considering for most IT departments.  A&E Consulting can help you choose the right global sourcing partner and will assist you in establishing the business relationship.  In addition, we will manage the first outsourced project to make the transition as smooth as possible.

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Global sourcing boasts some substantial benefits, but there are also significant risks that cannot be ignored.  When making the decision to incorporate global sourcing into your company’s business processes and development, the overall risk needs to be assessed to determine if outsourcing to another country is a wise move.  Consider the following risks before moving any operations to a global sourcing partner.

Turnover of key personnel. There is a high demand for IT professionals among global sourcing providers. Consequently, the employee turnover rate is incredibly high.  Vendors constantly try to attract talented engineers by luring them away from their current positions. This frequent turnover can impact your company because your projects may be delayed as new IT employees have to be trained and prepped on the current work.

Project specifications can be misunderstood. If a global sourcing provider is not given clear guidelines, there is a good chance that the system will not be developed correctly.  Before sending a project to a vendor, a detailed project specification should be created that will define what needs to be completed and how it should be handled.  Also, the global sourcing partner should have some type of quality assurance test that is used to ensure there are no errors in the programming.

Intellectual property theft. Intellectual property rights are among the most valuable assets a company can own.  If intellectual property is stolen and technologies are shared, the company can suffer a major financial loss.  When utilizing global sourcing, it is vital that certain measures be taken to protect the company’s intellectual property.  The least amount of proprietary information should be provided to the global sourcing partner.  The vendor should have policies in place to protect information that is given to them.

Loss of business knowledge. Generally, the developer of a process or system holds the business knowledge of that application.  As you more projects are sent to a global sourcing provider, the outsourcing company begins to lose business knowledge.  The outsourcing company becomes so tightly connected with the global sourcing partner that it makes it difficult to sever the relationship if need be.  To avoid such a situation, it is recommended that the IT department retain a large portion of business knowledge by determining what projects can be outsourced without compromising the outsourcing company’s position.

Cultural and communication barriers. There is no question that the culture in the United States is vastly different than other countries.  Outsourcing companies need to be aware that the global sourcing partners will have a work style that is unique from their own.  This awareness will help avoid misinterpretation of the vendor’s actions and mannerisms.

Communication can also be difficult with a global sourcing partner. For the vendor’s employees, English is not their native language and there is the potential for miscommunication.  Regular meetings should be conducted with project managers and summaries of the meetings should be distributed to all of the participants.  The summaries will ensure that everyone knows what is to be expected.

Vendor failure to deliver. Even with the best efforts, there is a chance that the global sourcing provider will not get the project completed.  Before outsourcing a project, this risk should be considered.  The outsourcing company should formulate a back up plan.  One alternative would be to outsource to multiple vendors to reduce the chance of failure.  If the outsourcing company can’t take the risk, then the project should be kept in house.

Global sourcing carries some risks that can’t be ignored, but it also has major advantages.  A&E Consulting can help you weigh the benefits of global sourcing.  We will assist you in choosing the right global sourcing partner and establishing the business relationship.  In addition, we will manage the first outsourced project to make the transition as smooth as possible.

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